SJM 1Q21 Cotai start poss partial, if low demand says analyst

SJM 1Q21 Cotai start poss partial, if low demand says analyst

Macau casino operator SJM Holdings Ltd’s first large-scale resort scheme, Grand Lisboa Palace (pictured), on Cotai, might realise its newly-revised first-quarter 2021 opening, only on a “partial” basis, depending on the state of consumer demand by then, suggests Union Gaming Securities LLC in a Tuesday note.

The institution added it might be 2022 before operations at the property are fully ramped up, amid the Macau market’s recovery from the Covid-19 pandemic.

“SJM is expecting to open Grand Lisboa Palace in first quarter 2021, with the scale of opening in terms of rooms and tables being dictated by market conditions at the time,” wrote analyst John DeCree in the memo.

“With this in mind, and the current trajectory of the recovery in Macau, we expect a partial opening,” he added.

“We suspect the opening of a large portion of the hospitality amenities would be delayed until more significant demand returns to Macau,” the analyst further noted.

Previously SJM Holdings had mentioned the property opening “by the end of 2020”.

Union Gaming noted in its Wednesday memo it expected Grand Lisboa Palace to see a “slower ramp” throughout next year, with 2022 being the “first full year of operations” for the Cotai property.

“We are currently forecasting HKD1.86 billion (approximately US$240 million) of earnings before interest, taxation, depreciation and amortisation for Grand Lisboa Palace in 2022,” wrote Mr DeCree.

The analyst has also cited the casino operator’s management suggesting that it would be “willing to provide credit” for premium mass and direct VIP play when its Cotai project opens.

In a Sunday memo, brokerage Sanford C. Bernstein Ltd said it “may take some time” still for mainland China authorities to resume same-day processing for Individual Visit Scheme (IVS) exit visas permitting mainland residents to visit Macau, mentioning that a return of such a system might have benefits in terms of volume of mainland visitors able to come to the city.

Hong Kong, which supplies in normal times at least 10 percent of Macau annual casino gross gaming revenue, according to some analysts, does not yet have a quarantine-free ‘travel bubble’ with Macau – albeit with a requirement for a Covid-19 test – in the manner of the mainland.

The HKD39-billion (US$5-billion) Grand Lisboa Palace project is to feature approximately 1,900 rooms via the hotel towers bearing the respective branding “Grand Lisboa Palace”, “Palazzo Versace”, and “Karl Lagerfeld”.

The property will also house facilities for meeting, incentive, conference and exhibition (MICE) events; a shopping mall; and restaurants; as well as a casino, reiterated SJM Holdings’ interim report filed to the Hong Kong bourse in late August.

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